(20.06.2007) In Azerbaijan,
BP has managed to promote oil revenue transparency and runs investment
programmes for community and regional development that could provide models for
extractive industries around the world. These are some of the conclusions of an
independent study carried out by Fridtjof Nansen Institute
researchers.

Oil-rich countries with unstable and undemocratic
governments often suffer from the 'resource curse', with huge increase in state
income leading to negative social development and often violent conflict. To
counter such effects, oil companies are increasingly expected to move the focus
of their corporate social responsibility (CSR) activities from the micro-level
 such as for instance the building of individual schools or health
clinics  towards macro-level contributions to the social and economic
development of the regions where they operate. This however makes it necessary
to address sensitive issues such as corruption, lack of transparency, oil
revenue spending and social inequality, which many companies are reluctant to
do, fearing to upset their host governments.

BP is widely regarded as a
global leader in the CSR field and the company has, at least rhetorically,
acknowledged its obligation to counter the resource curse in countries where it
is active. In Azerbaijan, BP is the leading foreign company, operating the
country's largest oil and gas fields. With Azerbaijan clearly displaying some
of the features of the resource curse, BP sees it as a critical test case for
carrying out its wider macro-level CSR agenda. Has BP succeeded in
this?

The authors of the study  FNI Senior researchers
Lars H. Gulbrandsen and
Arild Moe  find that BP has indeed done
efforts to address some of the macro-level CSR challenges in Azerbaijan. "BP
has done a lot to promote oil revenue transparency in Azerbaijan. Firstly
through its unprecedented move to make public the size of its signature bonus
payments, and secondly through its active role in getting Azerbaijan to become
the first country to join the Tony Blair-initiated Extractive Industries
Transparency Initiative," explains Gulbrandsen.

"BP has also managed to design investment
programmes for community and regional development that could provide models for
extractive industries around the world. These programmes are unique because
they unite all the oil companies in the joint ventures headed by BP. By linking
the programmes directly and formally to the business consortia and the
production sharing agreements (PSAs) under which they operate, BP manages to
share the costs and political risks of CSR activities with the other oil
companies, and also ensures a more stable and long-term CSR commitment," adds
co-author Moe.

All is however not well. There are still few control
mechanisms on oil revenue spending in Azerbaijan, and corruption remains
rampant. The study also finds that BP's actual engagement with the government
on solutions to fundamental development problems falls short of the company's
bold rhetoric on many accounts. The company seems careful to avoid upsetting
the authorities, even though the government's macroeconomic policies and lack
of commitment to develop democratic institutions threaten to undermine all CSR
efforts.

"We found that BP not only in terms of rhetoric but
also with regard to CSR activities goes over and beyond most other oil
companies in addressing macro-level issues. The BP case in Azerbaijan shows
that it is possible for companies to address macro-level issues aimed at
countering the effects of the resource curse. That said, more field research is
needed to evaluate the actual impact of such macro-level CSR
activities," Gulbrandsen ends.

The results of the
study were published as a peer-reviewed article in the Third World Quarterly
journal, and can be downloaded (for a fee) at the journal's website
here. You may also
contact the authors (via post@fni.no) to
request a complimentary copy.

Further reading:

FNI researchers have
written several reports and articles on the CSR activities and perceptions of
oil companies. Most of these can be downloaded from FNI's
website:

The Fridtjof Nansen Institute (FNI) is an
independent foundation engaged in research on international environmental,
energy, and resource management politics. The Institute maintains a
multi-disciplinary approach, with main emphasis on political science,
economics, and international law.